What is a P&I loan?

A principal and interest loan is a type of loan in which the borrower makes regular payments that include both the principal (the original amount borrowed) and the interest (the cost of borrowing the money). The payments are structured in a way that each payment reduces the amount of the loan and the interest owed.

This type of loan is common for home mortgages, car loans, and personal loans. With a principal and interest loan, the borrower is gradually paying down the debt over time and building equity in the property or asset being financed.

The interest rate on a principal and interest loan is typically fixed, meaning it remains the same throughout the life of the loan, or variable, meaning it can change over time based on market conditions.

A principal and interest loan is different from an interest-only loan, in which the borrower only pays the interest for a specified period of time and does not reduce the amount of the loan.